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You can easily obtain a cost-free car finance quote by reaching out to us via phone or utilising our user-friendly online quote form.
The Federal Government introduced a number of accelerated asset depreciation measures as part of the coronavirus economic stimulus response. These include Instant Asset Write-Off and temporary full expensing.
Both these measures relate to depreciation or writing off the value of the asset, that is the vehicle in the year of purchase rather than over time under usual ATO rulings.
In order to depreciate the car as an asset, the borrowing company must have that asset on their books. That is, as an asset for their company. This is the case with Chattel Mortgage but not with Leasing. So our understanding is that Chattel Mortgage is most suited to realise the benefits of these measures.
The different types of business vehicle finance – Chattel Mortgage, CHP and Leasing – have different features in regard to the treatment of GST, tax deductions, ownership of the vehicle, balance sheet entries and suitability to either the cash or accruals methods of accounting.
Due to the accounting implications, it is strongly recommended that business owners refer to their accountant, chief financial officer or financial advisor for advice as to which finance product is best suited to achieve their financial objectives.
It is not within the scope or responsibility of the role of Jade to advise on the specific selection of finance products for individual customers or businesses.
We offer the full portfolio of commercial finance facilities for business vehicle purchases:
Each lending type offers tax benefits and has varying treatments of GST and other finance and accounting elements. The ownership of the vehicle during the loan term also varies. With Chattel Mortgage and CHP the borrower has ownership and use of the vehicle when the purchase is finalised. With Leasing, the borrower has full use of the vehicle but ownership is retained by the lender.
The treatment of GST varies for Leasing, Chattel Mortgage and Commercial Hire Purchase. GST is charged on the purchase price of a car but not on the interest charged on the loan.
With Chattel Mortgage and CHP, the full GST which is applied to the purchase of the automobile can be claimed by the borrower/buyer when the purchase is finalised. That means on the next BAS return. As the full amount of GST applicable to the purchase has been claimed, no GST then applies to the repayments.
With Leasing the GST is applied to the repayments and claimed by the borrower on the relevant BAS returns either monthly, quarterly or annually according to their BAS lodgement schedule.
The same guidelines apply to the balloon and residual payments.
Please note claims maybe up to the luxury car tax threshold.
The treatment of tax deductions varies with the different types of business vehicle finance products. The monthly repayment includes interest and paying off the loan principle. It will also include an amount to cover any recurring lender charges.
With leasing, the repayments are tax deductible.
With Chattel Mortgage and CHP, the interest portion of the repayments is the only tax deductible element.
A tax benefit is realised by Chattel Mortgage and some CHP loans by way of asset depreciation. With these types of finance, the vehicle is entered in the balance sheet of the borrower and is subject to a depreciation allowance in accordance with ATO rulings.
With Vehicle Leasing, the vehicle is not entered in the borrower’s balance sheet as ownership is retained by the lender. So the asset is not subject to the tax benefit of depreciation by the borrower.
So Leasing provides a tax benefit with the monthly repayments and Chattel Mortgage and CHP receive a tax deduction when the asset is depreciated in the end of year accounts.
You can easily obtain a cost-free car finance quote by reaching out to us via phone or utilising our user-friendly online quote form.